Gambling law's donation curbs may not limit much

When the legislature went to work on Gov. Martin O'Malley's gambling bill, one of the first provisions to be rolled back was a sweeping ban on political contributions from casino interests.

As introduced, the bill would have prevented everyone from a casino owner to a blackjack pit boss from giving money to Maryland politicians. Also barred: casino holding companies, their intermediaries and subsidiaries.

"Frankly I'd like to ban gaming dollars from the whole damn process," O'Malley said, speaking to reporters over the summer. "That's D-A-M-N."

The General Assembly did not agree. It changed the legislation so that only those who own at least5 percent of a casino are prohibited from giving. And the measure — signed into law this week — is now silent on holding, intermediary and subsidiary companies.

"They turned it into a charade by blowing a hole through it," said Del. Luiz Simmons, a Montgomery County Democrat who has for years tried to stop casinos dollars from flowing into state politics. "It would be better to pass nothing than to pass that."

Legislators who amended the bill said the original language was far too broad in affecting relatively low-level employees. But the 5 percent provision also means that many of the owners of Baltimore's planned casino can still write campaign checks. CBAC, the Caesars Entertainment-led group that was just awarded the license, includes 40 principals, most of whom have less than a 5 percent interest in the project.

And the legislation is silent on companies seeking a casino license who haven't formally applied yet. That means deep-pocketed MGM Resorts — which wants to build a casino at National Harbor and is already helping to fund a full-throated advertisement campaign — can give freely to state lawmakers until it submits an application.

Holly Wetzel, spokeswoman for the American Gaming Association, said about a half-dozen of the 23 states with casinos have enacted curbs. She said the group takes no official positions on state-level issues, but she questioned the rationale for a ban.

"Casinos are businesses just like any others," she said. "To place restrictions on our business because it's a gambling business, we do question that."

Sen. Edward Kasemeyer, who chairs the Senate Budget and Taxation Committee that weakened the campaign ban in O'Malley's bill, agreed. "In a way, it looks bad that you exclude the gambling people. Why not other people who do business with the state?" he said.

Kasemeyer also said the governor's provision was confusing and went too far. It raised questions about whether a partner at a law firm, for example, that has a Maryland casino firm as a client would be included.

The watchdog group Common Cause said that if lawmakers were serious about limiting the clout of the casino industry, they would need to close another loophole in Maryland election law — one that permits gifts up to the state's maximum levels through multiple limited liability corporations controlled by the same person.

"It sounds good to say, 'We're going to ban gambling contributions,' but there are dozens of ways for gambling interests to make their case in Annapolis," said James Browning, regional director of Common Cause. "You need comprehensive reform."

A provision Common Cause has tried to ban for years effectively allows some wealthy individuals to bypass the state's donation limits of $4,000 per candidate and $10,000 in all during a four-year cycle.

David Cordish, for example, owner of the company that operates the Maryland Live casino at Arundel Mills, has given only about $7,000 to Maryland candidates since 2007 under his own name. But records show that 25 different LLCs connected to him have given about $98,000 to various candidates. Under the new law, those LLCs could keep giving.

Joe Weinberg, a managing partner at the Cordish Cos., said the Maryland Live owner wants stronger curbs than the governor proposed.

"We enthusiastically support the toughest, most comprehensive ban — directly and indirectly — on casino political contributions adopted anywhere in the U.S. The issue with the legislation is that it doesn't go far enough," Weinberg said.

"To be credible, these loopholes must be closed," Weinberg said.

Courts in some states have struck down donation bans as violating the right to free speech. Even when bans are upheld, such laws can't prevent special interests from funneling unlimited contributions — in secret — through 501c(4)s, the so-called social welfare funds that in recent years have been widely used to run political ads on behalf of an issue or candidate with no disclosure requirements. Such organizations are regulated by the Internal Revenue Service, not the states.

Browning said courts have split on the constitutionality of contribution bans aimed at the gambling industry. He said such bans were upheld in Louisiana, New Jersey and Michigan but thrown out in Pennsylvania. He said he believes such a ban would be upheld in Maryland.

Certainly casino interests have not been shy about using their money to try to advance their interests in Maryland.

William Rickman, owner of the Ocean Downs racetrack and casino, has been giving on a large scale for the last decade. He, along with family members and affiliates, gave almost $400,000 from 2003 to 2007. Penn National, owner of the Hollywood Casino in Perryville and a potential casino site at Rosecroft Raceway, is a politically active donor as well.

Other companies have found routes to cultivate political allies that even O'Malley's strict version of the ban wouldn't have touched. Caesars has given $150,000 to the Democratic Governors Association — which O'Malley heads — since December 2011, according to IRS records. Such gifts are not affected by state laws.

While the courts in recent years have in many cases loosened controls over political donations, the Maryland attorney general's office has taken the position that banning contributions to candidates by members of a regulated industry is within the General Assembly's power.

"Courts more often than not have upheld contribution limits for members of a regulated industry," Assistant Attorney General Sandra Benson Brantley wrote in response to a lawmaker's inquiry last week.

"Although some courts have struck contribution limits as unconstitutional where the ban was overbroad or where there was no indication of a history of corruption or impropriety involving the impacted industry, the bill provisions at issue here are narrowly tailored and targeted to address sufficient state concerns."

Comptroller Peter Franchot, a Democrat who has been critical of O'Malley, said even the originally proposed limits were too little, too late to curb the influence of gambling interests in Maryland.

"Those horses already left the barn a long time ago, and closing the door with this prospective ban on campaign contributions is laudable, but it is preposterous to think it can solve the problem," he said.